1.

Arbitration Agreement explained with case laws

 [Link]
[Link]

2. Key Distinction between “agreement in writing” (Section 7)

and “express agreement in writing” (Section 12(5))
A) Section 7 of the A&C Act

Section 7 of the Arbitration and Conciliation Act, 1996 defines what constitutes
an arbitration agreement and mandates that such agreement must be "in
writing". The provision is foundational to the entire arbitration framework as it
establishes the jurisdictional basis for arbitration proceedings.

Statutory Framework

According to Section 7(3), an arbitration agreement shall be in writing. Section

7(4) elaborates that an arbitration agreement is deemed to be in writing if it is
contained in:

 A document signed by the parties

 An exchange of letters, telex, telegrams or other means of

telecommunication which provide a record of the agreement

 An exchange of statements of claim and defence in which the existence of

the agreement is alleged by one party and not denied by the other

Lower Threshold - Record of Agreement

The critical feature of Section 7 is that it focuses on the existence of a written

record of the agreement rather than requiring explicit articulation in words. The
provision adopts a liberal approach and recognizes that arbitration agreements
can be inferred from documents that provide a record of such agreements.

Via- [Link]

B) Section 12 (5) of the A&C Act

Section 12(5): "Express Agreement in Writing" - Waiver of Ineligibility

Section 12(5) of the Act addresses an entirely different concern - the ineligibility
of arbitrators based on their relationship with the parties or the subject matter of
the dispute. The provision reads:

"Notwithstanding any prior agreement to the contrary, any person whose

relationship, with the parties or counsel or the subject-matter of the dispute, falls
under any of the categories specified in the Seventh Schedule shall be ineligible
to be appointed as an arbitrator; provided that parties may, subsequent to
disputes having arisen between them, waive the applicability of this sub-section
by an express agreement in writing".
 Higher Threshold - Express Words Required

The proviso to Section 12(5) creates a significantly higher threshold than Section
7. The Supreme Court in Bharat Broadband Network Ltd. v. United Telecoms Ltd.
extensively analyzed this distinction and held that the expression "express
agreement in writing" refers to an agreement made in words as opposed to an
agreement which is to be inferred by conduct.

Via- [Link]
applicability-of-section-125-of-the-arbitration-conciliation-act/

Section 7 Section 12(5)

1. Defines what constitutes an 1. Deals with waiver of ineligibility of

arbitration agreement arbitrator

2. Establishes jurisdictional 2. Protects independence and

foundation for arbitration impartiality of arbitrators

3. Applies at the stage of formation

3. Applies after disputes have arisen
of arbitration agreement

4. Lower threshold - focuses on 4. Higher threshold - requires express

existence of written record articulation in words

5. Can be inferred from documents 5. Cannot be inferred from conduct,

providing record of agreement howsoever extensive

6. Includes exchange of statements

6. Must be made in express words with
where existence alleged and not
conscious intention
denied

Mode of creation

7. Can be contained in exchange of

letters, telegrams, 7. Must be express agreement in words
telecommunications

8. Sufficient if document provides 8. Must reflect full awareness of Section

record of agreement 12(5) applicability

9. May be inferred from conduct of

9. Cannot be substituted by conduct
parties in limited circumstances

[Link]. Case Name & Citation Judgment

1 Bharat Broadband Network Unlike Section 4 of the Act which deals with deemed waiver of
Ltd. v. United Telecoms Ltd., the right to object by conduct, the proviso to Section 12(5) will
[Link]. Case Name & Citation Judgment

only apply if subsequent to disputes having arisen between

the parties, the parties waive the applicability of sub-section
(5) of Section 12 by an express agreement in writing. For this
reason, the argument based on the analogy of Section 7 of the
Act must also be rejected. Section 7 deals with arbitration
agreements that must be in writing, and then explains that
such agreements may be contained in documents which
provide a record of such agreements. On the other hand,
Section 12(5) refers to an express agreement in writing. The
expression express agreement in writing refers to an
agreement made in words as opposed to an agreement which
is to be inferred by conduct. Here, Section 9 of the Contract
Act, 1872 becomes important. It is thus necessary that there
be an express agreement in writing. This agreement must be
an agreement by which both parties, with full knowledge of
the fact that an arbitrator has become ineligible under Section
(2019) 5 SCC 755 12(5), agree to waive such ineligibility. [Paragraph 20]

By our analysis, we are obligated to arrive at the conclusion

that once the arbitrator has become ineligible by operation of
law, he cannot nominate another as an arbitrator. The
arbitrator becomes ineligible as per prescription contained in
Section 12(5) of the Act. It is inconceivable in law that person
who is statutorily ineligible can nominate a person. Needless
to say, once the infrastructure collapses, the superstructure is
bound to collapse. One cannot have a building without the
plinth. Or to put it differently, once the identity of the
TRF Ltd. v. Energo Managing Director as the sole arbitrator is lost, the power to
Engineering Projects Ltd., nominate someone else as an arbitrator is obliterated.
2 (2017) 8 SCC 377 [Paragraph 54]

We thus have two categories of cases. The first, similar to the

one dealt with in TRF Limited where the Managing Director
himself is named as an arbitrator with an additional power to
appoint any other person as an arbitrator. The element of
invalidity would thus be directly relatable to and arise from the
interest that he would be having in such outcome or decision.
If that be the test, similar invalidity would always arise and
spring even in the second category of cases. The ineligibility
referred to therein was as a result of operation of law, in that a
person having an interest in the dispute or in the outcome or
Perkins Eastman Architects decision thereof, must not only be ineligible to act as an
DPC v. HSCC (India) Ltd., arbitrator but must also not be eligible to appoint anyone else
3 (2020) 20 SCC 760 as an arbitrator. [Paragraph 15]

Under Section 12(5), A.C.A., a person whose relationship with

the parties or counsel falls under the Seventh Schedule is
Jaipur Zila Dugdh Utpadak ineligible to act as arbitrator. But the parties, subsequent to
Sahkari Sangh Ltd. v. Ajay the dispute having arisen, may waive the applicability of
Sales & Suppliers, [2021] Section 12(5) by an express agreement in writing. However,
4 SCC OnLine SC 1635 such waiver is to be respected only in certain exceptional
situations such as family arbitrations or situations where the
[Link]. Case Name & Citation Judgment

ineligible person commands blind faith by both parties to the

dispute. The Seventh Schedule provides for arbitrator's
relationship with the parties or counsel. The insertion of
Section 12(5) sub-section through the 2015 Amendment read
with the Seventh Schedule was to ensure that an arbitrator
possesses the quality of impartiality and independence which
is a sine qua non for the existence of fair and impartial
arbitration. [Relevant Paragraphs]

The waiver under Section 12(5) of the A&C Act has to be by an

express agreement in writing. The contention that the
Arbitrator was appointed by the Chief Engineer, DSIIDC
pursuant to the request for appointment of Arbitrator made by
the petitioner and hence the petitioner could not challenge the
appointment of the said Arbitrator is not acceptable. A petition
under Section 14 of the Act is maintainable if the arbitrator is
ineligible under Section 12(5). Mere participation in the arbitral
A.K. Builders v. Delhi State proceedings does not constitute a waiver under Section 12(5)
Industrial Infrastructure of the A&C Act. The only means to be free of the rigours of
Development Corporation Section 12(5) was to have an express agreement in writing
Ltd., [2022] SCC OnLine after disputes have arisen between the parties. [Relevant
5 Delhi HC 3821 Paragraphs]

The agreement in writing must reflect awareness on the

parties to the applicability of the said provision as well as the
resultant invalidation of the arbitrator to arbitrate on the
disputes, as well as a conscious intention to waive the
applicability of Section 12(5). The express agreement in
writing was an irreplaceable condition which could not be
substituted by conduct, howsoever extensive or suggestive.
Accordingly, the extensions applications did not constitute an
agreement in writing to waive the applicability of Section
12(5). The Court cannot infer from the conduct of the parties
Smaash Leisure Ltd. v. that they have waived their right to object to the ineligibility of
Ambience Commercial the arbitrator under Section 12(5). The expression express
Developers Pvt. Ltd., [2023] agreement in writing refers to an agreement made in words as
6 SCC OnLine Delhi HC 2965 opposed to an agreement which is to be inferred by conduct.

Unilateral appointment by a company violates Section 12(5)

read with the Seventh Schedule. There must be a written
agreement between parties waiving Section 12(5). In the
present case, there was no such written agreement between
the parties waiving the applicability of Section 12(5). Mere
conduct cannot substitute express agreement in writing. The
agreement in writing should reflect the parties awareness of
the applicability of Section 12(5) and their conscious intention
to waive it. The mere participation in the arbitral proceedings
Score Information by a party cannot be termed as a waiver of the right under
Technologies Ltd. v. GR Infra Section 12(5). Section 7 deals with arbitration agreements that
Projects Ltd., [2021] SCC must be in writing, but Section 12(5) refers to an express
7 OnLine Delhi HC 513 agreement in writing.
[Link]. Case Name & Citation Judgment

Unlike Section 4 of the Act which deals with deemed waiver of

the right to object by conduct, the proviso to Section 12(5) will
only apply if subsequent to disputes having arisen between
the parties, the parties waive the applicability of sub-section
(5) of Section 12 by an express agreement in writing. For this
reason, the argument based on the analogy of Section 7 of the
Act must also be rejected. Section 7 deals with arbitration
agreements that must be in writing, and then explains that
such agreements may be contained in documents which
provide a record of such agreements. On the other hand,
Section 12(5) refers to an express agreement in writing. The
expression express agreement in writing refers to an
agreement made in words as opposed to an agreement which
is to be inferred by conduct. Participation in arbitral
Govind Singh v. M/s Satya proceedings does not tantamount to waiver under Section
Group Pvt. Ltd., [2023] SCC 12(5). Even assuming participation without objection, right
8 OnLine Delhi HC 81 under Section 12(5) is not waived. [Paragraph 20]

Unilateral appointment without express written consent is void

ab initio under Section 12(5) of the Arbitration Act. Waiver
must be explicit written and executed only after the dispute
arises. The essence of Section 12(5) and the proviso is that
there must be an explicit agreement in writing which should
be obtained after the dispute has arisen. The agreement must
reflect awareness of Section 12(5) applicability and conscious
intention to waive. A person ineligible under Section 12(5)
read with the Seventh Schedule cannot exercise any powers,
whether directly or indirectly, including the power of
Shakti Pump India Ltd. v. appointment of another arbitrator. The ineligibility is de jure
Apex Buildsys Ltd., [2025] and is not dependent on the awareness or consent of the
9 SCC OnLine Delhi HC 879 parties.

The only means to be free of the rigours of Section 12(5) was

to have an express agreement in writing after disputes have
arisen between the parties. The agreement in writing must
reflect awareness on the parties to the applicability of the said
provision as well as the resultant invalidation of the arbitrator
to arbitrate on the disputes as well as a conscious intention to
waive the applicability of Section 12(5). The express
agreement in writing was an irreplaceable condition which
could not be substituted by conduct howsoever extensive or
suggestive. Section 7 deals with arbitration agreements in
writing and explains such agreements may be contained in
JMC Projects India Ltd. v. documents providing record of such agreements. Section 12(5)
Indure Private Ltd., [2020] refers to express agreement in writing made in words not
10 SCC OnLine Delhi HC 1517 inferred by conduct.
3. Whether Section 12(5) Curtails the Scope of Arbitrability Under
Section 7

[Link]
unilateral-appointment-arbitrator-independence/

Section 12(5) of the Arbitration and Conciliation Act, 1996 does NOT
curtail the scope of arbitrability under Section 7. This is a critical
distinction that has been clarified by the Supreme Court in several
landmark judgments.

- [Link]
act-can-be-applied-retrospectively-supreme-court-reaffirms/

Section 12(5), on the other hand, deals with a completely different issue –
the eligibility and ineligibility of persons to be appointed as arbitrators. It
states: "Notwithstanding any prior agreement to the contrary, any person
whose relationship, with the parties or counsel or the subject-matter of
the dispute, falls under any of the categories specified in the Seventh
Schedule shall be ineligible to be appointed as an arbitrator."

- [Link]
arbitration/

RECENT JUDGEMENTS ON 12(5) JAN-JUN 2024

Whether the appointing party can challenge an arbitration award

on grounds of unilateral appointment of the arbitrator?

9. Telecommunication Consultants India Ltd v. Shivaa

Trading [Judgment dated April 9, 2024, in O.M.P. (COMM) 311 of
2022]

The Delhi High Court reiterated that an award passed by a unilaterally

appointed arbitrator can be challenged on grounds of invalidity of such
appointment due to consequent lack of inherent jurisdiction and
proceedings, even by the party who made such an appointment. The
Court placed reliance on the position taken by the apex court in Bharat
Broadband Network Ltd. v. United Telecom Limited [Civil Appeal
No. 3972 of 2019] and further ruled that mere participation in the
arbitral proceedings cannot amount to an ‘express waiver’ of the right to
object envisaged under Section 12(5) of the Arbitration and Conciliation
Act.

Since any decision taken by a unilaterally appointed arbitrator is void ab

initio, the Court held that the appointing party also has the right to
challenge a defect of jurisdiction at any stage as the defect concerns the
power of the tribunal to decide the dispute.

Whether provisions of Section 12(5) read with the Seventh

Schedule to the Arbitration and Conciliation Act also apply to
institutional arbitrations?

10. Era International v. Aditya Birla Global Trading India Pvt.

Ltd [Judgment dated February 26, 2024, in Comm. Arb. P. (L)
27638 of 2023]

The Bombay High Court held that the rules of an arbitral institution cannot
override the provisions of the Arbitration and Conciliation Act and affirmed
that the provisions of Section 12(5) of the Act are applicable to
institutional arbitrations as well. It found that a court’s authority to decide
on the termination of an arbitrator's mandate remains uncontested even if
a controversy arises pertaining to the grounds mentioned in Section 14(1)
(a).

Further, the Court asserted that merely because the challenge to the
arbitrator's appointment has been dismissed by the arbitral institution in
accordance with its rules, it cannot preclude the jurisdiction of the Court
under Section 14 of the Arbitration and Conciliation Act on grounds falling
under the 7th Schedule.

RECENT JUDGEMENTS ON SECTION 7 JAN-JUN 2024

Whether a policy circular amounts to an arbitration agreement if

it contemplates further consent of the parties?

1. Dhansar Engineering Company Pvt Ltd v. Eastern Coalfields

Ltd, [Judgment dated April 18, 2024, in RVWO No. 38 of 2023]

The Calcutta High Court held that a policy circular issued by a parent
company contemplating arbitration would not amount to an arbitration
agreement if it required fresh consent of the contractor to refer the
dispute to arbitration. Further emphasizing that for existing contracts, the
circular required consent of the contractor for reference to arbitration, the
Court held that it cannot be construed to be an arbitration agreement as it
would require a fresh arbitration agreement to be executed between the
parties prior to the reference of the dispute to arbitration.

Whether an arbitration clause would be void for uncertainties if it

provides for multiple seats of arbitration?

2. Vedanta Limited v. Shreeji Shipping [Judgment dated February

8, 2024, in ARB.P. 342 of 2023]

The Delhi High Court ruled that an arbitration agreement specifying

multiple seats of arbitration, thus providing a choice to the parties, is not
void under Section 29 of the Indian Contract Act, 1872 for ambiguity or
uncertainty. It clarified that once the arbitration seat is determined, the
courts of that seat have exclusive jurisdiction over the arbitral
proceedings.

The Court, citing the Supreme Court's decision in Indus Mobile

Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. [(2017) 7
SCC 678], held that designating the arbitration seat is equivalent to an
exclusive jurisdiction clause.

Whether reference to the Arbitration Act of 1940 would make an

arbitration clause illegal and unenforceable?

3. M/s. ICDS Ltd v. Sri Bhaskaran Pillai [Judgment dated February

9, 2024, in M.F.A. 6319 of 2014 (AA)]

The Karnataka High Court ruled that arbitral proceedings started under
the 1940 Act before the 1996 Act can continue under the old Act unless
parties agree otherwise. It also held that arbitration agreements made
after the 1996 Act, even if they mistakenly reference the 1940 Act, remain
valid and are governed by the 1996 Act.